Extensions, Part 1

The strongest brands occupy a clearly defined and well-focused position in customers’ minds. They dominate their categories: Adidas in sportswear, Honda in cars, and so on. But brands often aren’t limited to a single category. Adidas sells fragrance. Honda makes motorcycles, boats, and planes. And some uberbrands seem to cover everything—GE offers lightbulbs, dishwashers, industrial turbines … and financial services. Do brands have any limits?Brands inhabit categories, but are not really of those categories. A great brand transcends categorization to stand for a larger, abstract meaning. Adidas is about winning more than sportswear, Honda is about getting around reliably rather than wheels. GE wraps all its offerings in values such as caring and quality.A great brand can be applied to any category in which it finds its larger truth reflected. Virgin’s brand is about exuberance and defiance of the establishment. It works as an icon brand in areas as diverse as music, airlines, and cell phones. (But it didn’t work in cola, because nobody ever really felt a need to defy Coke or Pepsi.)It is important to distinguish between brand extensions, line extensions, and licensed merchandise. Each works for a different reason. Brand extensions can be thought of as functioning vertically: the same brand is used in a new category where the brand’s meaning still makes sense to customers. Line extensions tend to be horizontal: they may be geared to higher or lower segments, but they still function broadly within the same category. Licensed merchandise takes the brand and applies it to an item (usually unrelated) made by another firm, to ride on the popularity of the original brand experience.A brand extension is often accomplished with a sub-brand. Honda’s SUVs (sport utility vehicles) include Pilot and CR-V; its coupes, Accord and Civic; its minivans, Odyssey; trucks, Ridgeline; sports cars, S2000; and so on, to bikes, boats, and planes. All carry the Honda brand, which is not narrowly associated with any single category. Companies often try to profit by applying successful brands to new items within the same category or line, like flavors of ice cream. However, this can backfire. When Miller introduced new beer varieties (Miller Lite, Miller Genuine Draft) the aim was to exploit its Miller High Life brand equity in order to appeal to different groups of drinkers. However, by treating the different beers as line extensions, rather than their own brands, Miller diluted the strength of its overall brand.In the best of cases, brand extension provides “coattails” that help launch a new product. Apple Computer rolled out the iPod music player this way. The Apple brand is about innovation and ease of use, so it works for portable music players as well as computers. Later, the iPod’s success provided a “halo” effect that encouraged satisfied users to try using a Macintosh computer for the first time.The limits of customer credulity are often tested in licensed merchandising. Many brands fail when they license their brands in new areas because customers don’t believe the brand has any relevance there. Harley-Davidson symbolizes an American lifestyle— rebellion and the freedom of the open road. Its brand is licensed to footwear and men’s aftershave, which has some connection, but also to a cake-decorating kit!